apics chapter financial manual

83 Pages·2013·0.68 MB·English

FINANCE/TREASURER
CHAPTER LEADERSHIP HANDBOOK

© 2013 APICS The Association for Operations Management

APICS The Association for Operations Management
8430 West Bryn Mawr Avenue, Suite 1000
Chicago, IL 60631

Stock #01003 October 2013
Finance/Treasurer – Chapter Leadership Handbook i
Preface
This manual describes basic financial tools and techniques that can help APICS Chapters
responsibly manage Chapter funds. It also explains a Chapter’s reporting responsibilities to
federal, state and local regulatory agencies. Using this manual as a guide, your Chapter
can implement financial management guidelines and controls that are consistent with
standard accounting practices and that make it easier for your members and APICS
professional staff to understand the Chapter’s financial operations. Each Chapter’s board of
directors should formally adopt policies, tailored to local Chapter requirements, to
implement the financial control procedures that are described in this publication.
Our thanks to Susan S. Vowell, CPA, for her contributions in preparing this publication.
Special thanks also to Joyce M. Mihuta; Jon E. Bingol, CFPIM; Ronald K. Althaus, CFPIM,
CIRM, C.P.M.; Luis Barcón, CPIM, CIRM, C.P.M.; and James Semerad, CPIM, Jonah, for
their invaluable contributions to the content.
Finance/Treasurer – Chapter Leadership Handbook ii
Contents

Preface................................................................................................................................................................... ii
Channel Partner Agreement and Chapter Board of Directors Financial Responsibility
Chapter Financial Responsibility ............................................................................................................................ 1
Chapter Board of Directors Financial Responsibility............................................................................................ 1
Appointing a Chapter Treasurer ......................................................................................................................... 3
Orienting New Treasurers .................................................................................................................................. 3
Conflict of Interest Policy .................................................................................................................................... 4
Financial Status of APICS Chapters....................................................................................................................... 5
Nonprofit, Tax-Exempt, or Not-for-Profit?............................................................................................................ 5
Definition of a Professional Society .................................................................................................................... 6
What Is the Difference Between 501(c)(6) and 501(c)(3)? .................................................................................. 6
Other Financial Management Considerations .................................................................................................. 7
Why and How to Incorporate .............................................................................................................................. 9
Handling Your Chapter’s Funds ........................................................................................................................... 11
Flow of Financial Information: Cash Receipts and Disbursements .................................................................... 11
Cash Basis vs. Accrual Basis Accounting ......................................................................................................... 12
Chart of Accounts ............................................................................................................................................ 12
“Keeping the Books” ......................................................................................................................................... 13
Accounting Software ........................................................................................................................................ 14
Maintaining Financial Records.......................................................................................................................... 14
Financial Statements and Reporting .................................................................................................................... 16
Financial Statements ........................................................................................................................................ 16
Comparative Analyses and Variances .............................................................................................................. 17
Year-End Audit or Review? .............................................................................................................................. 18
Engaging an Auditor......................................................................................................................................... 19
Budget Process ................................................................................................................................................... 22
From Strategic Plan to Financial Plan ............................................................................................................... 22
How to Establish an Annual Budget .................................................................................................................. 22
Comparing Budget to Actual Performance ........................................................................................................ 23
Cash Flow Projections...................................................................................................................................... 24
Multiyear Plan .................................................................................................................................................. 25
Internal Control .................................................................................................................................................... 26
Banking ........................................................................................................................................................... 26
Accepting Credit Card Payments ...................................................................................................................... 28
Electronic Commerce ....................................................................................................................................... 28
Recommended Policies and Procedures .......................................................................................................... 29
Investment of Chapter Funds ........................................................................................................................... 30
Transfer Requirements When Officers Change ................................................................................................ 31
Appointing an Internal Audit Committee ............................................................................................................ 31
Procedures for Chapter Credit from APICS ...................................................................................................... 32
Taxes .................................................................................................................................................................. 32
How and Why to Apply for Federal Tax-Exempt Status (Form 1024) ................................................................. 33
Returns for Tax-Exempt Organizations: Form 990 and Form 990-EZ ................................................................ 34
Unrelated Business Income .............................................................................................................................. 34
Form 990-T Requirements ............................................................................................................................... 37
IRS Audit ......................................................................................................................................................... 37
State and Local Taxes and Sales Taxes ........................................................................................................... 37
State Registration for Soliciting Funds .............................................................................................................. 39
Employee vs. Independent Contractor (Form W-2 vs. Form 1099) .................................................................... 39
Canada ............................................................................................................................................................ 41
Mexico ............................................................................................................................................................. 43
Insurance Protection for Legal Liability ............................................................................................................. 46
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Volunteer Protection Act ................................................................................................................................... 46
Scope of Chapter Insurance Coverage Provided by APICS .............................................................................. 47
Directors’ and Officers’ (D&O) and General Liability Insurance ......................................................................... 48
Appendix A: Chart of Accounts ............................................................................................................................ 49
Appendix B: Financial Reports ............................................................................................................................. 52
Appendix C: Sample Request for Proposal (RFP) for Audit Services .................................................................... 54
Appendix D: Sample Consolidated Chapter Budget for Fiscal Year XXXX-XXXX ................................................. 55
Appendix E: Frequently Asked Questions Regarding Chapter Billing Numbers ................................................... 56
Appendix F: Association Law Handbook (Personal Liablility) ................................................................................ 59
Appendix G: Internal Control Checklist ................................................................................................................. 63
Appendix H: Federal Tax Filing Calendar ............................................................................................................. 64
Appendix I: Records Retention Timeline .............................................................................................................. 65
Appendix J: State and Federal Regulatory Contacts ............................................................................................ 66
Appendix K: Additional Reference Sources .......................................................................................................... 76
Appendix L: Sample Articles of Incorporation ....................................................................................................... 77
Appendix M: Federal Information Returns and Tax Forms .................................................................................... 79
Appendix N: Channel Partner Agreement, North America ………………………………………………………………..80

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Chapter Financial Responsibility
APICS Chapters provide a service directly to their members and indirectly to APICS and
depend upon both for financial support. Thus, Chapters must create a relationship of trust
with members and with APICS in the receipt and disbursement of funds. Establishing firm
financial controls and procedures, as well as providing reports on your Chapter’s financial
position, will create—among members and with APICS—a trust that your Chapter is
committed to the prudent expenditure and protection of their funds.
The financial responsibilities of a Chapter may be summarized into the following five major
areas, each of which is addressed in detail in later sections of this manual:
• Maintaining financial records (pages 14–15)
• Preparing accurate and meaningful financial statements (pages 16–17)
• Budgeting and anticipating financial challenges (pages 22–24)
• Establishing internal controls to safeguard and manage the Chapter’s financial
assets (pages 26–32)
• Complying with federal, state, and local reporting requirements (pages 32–45)
Channel Partner Agreement and Chapter Board of Directors Financial
Responsibility
Channel Partner Agreement (CPA) Development Process
• In 2009, the Strategic Direction Committee recommended the channel partner
strategic priority. The strategic priority was approved by the Board.
• The Chair of the 2010 APICS Board assigned a Task Force comprised of a chapter
representative from each district plus three board members.
• A draft agreement was developed and input received from APICS chapters. This
was completed in 2011.
• In January 2012, the Board approved the CPA draft document.

The intent of this agreement is to strengthen the organization, including APICS Corporate
and Chapters, by being able to share services and to protect the brand and image of the
association for all of its current and future customers.

Definition of a Channel Partner
APICS recognizes three different types of Channel Partner. These are the affiliated
organizations that work with APICS to deliver education, member benefits, and/or
certification exams:

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Definition of a Channel Partner (cont’d)
Within North America
Chapters—provide some or all education, member benefits, and group testing

Outside North America
International Associates (IAs)—non-profit organizations which offer joint memberships and
public test sites
Authorized Education Providers (AEPs)—generally for-profit corporate entities that provide
instruction
All IAs and AEPs are under current agreements

Financial Officers Role in Complying with the CPA
• APICS will provide membership dues collection and disbursement.
• APICS will continue to disburse APICS member Chapter dues as determined by the
APICS board.
• APICS will disburse APICS Member at Large dues to the appropriate Chapter as
determined by the APICS Board of Directors.
Chapter Key Responsibilities
• Chapter will be a legal entity and remain one in good standing.
• Chapter will maintain finances in the name of the legal entity and provide annual
assertion of same.
• At least one (1) Chapter board member will attend at least one (1) officer training
session per program year.
• At least one (1) Chapter board member will participate in the officers’ electronic
discussion list.

As a body, the board of directors of a Chapter has considerable power. In contrast, an
individual director—acting alone—has almost no power. Rather, each director exerts power
as one element in the board of directors. However, individual directors are still legally
accountable for Chapter actions in certain circumstances and have legally protected rights
and duties to participate in the board’s decision. (See the section of this manual on the
Volunteer Protection Act, page 46.)
Among the primary responsibilities of a Chapter’s board of directors is acting as steward of
the Chapter’s finances. Since the Chapter is funded with member dues and the support of
APICS, directors should ensure that funds are spent in order to further member interests.
To fulfill this mandate, directors must effectively oversee Chapter operations, including
regularly evaluating the viability, effectiveness, and cost efficiency of program activities and
service delivery systems.
The Chapter board of directors is also ultimately responsible for ensuring compliance with
all relevant federal, states/countries/provinces, and local governmental regulations and
reporting requirements.
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Appointing a Chapter Treasurer
In general, the treasurer of a Chapter is second in importance only to the president or board
chair because the Chapter’s programs depend entirely on the Chapter’s finances. While not
necessarily responsible for raising funds, the treasurer is charged with stewardship of the
Chapter’s funds and with the responsibility of monitoring and reporting the Chapter’s
financial position. The treasurer should have basic accounting knowledge and, ideally,
general financial management expertise.
Orienting New Treasurers
Here are several strategies to ensure an orderly transition.
Much of your transitional work begins soon after you assume office.
Immediately after being named treasurer, start compiling a file with tips for your successor.
Note questions you had during the different stages of your own orientation so that later you
can share them with your successor. This tip sheet will help with troubleshooting, updating
policies, and noting how difficult situations were handled.
Six months before transition, give your input to the Chapter president concerning qualities
needed in an effective treasurer.
Be candid. If you believe a suggested candidate does not have what it takes, say so.
Three months before transition, summarize the tips for the new treasurer.
The material in this handbook will be helpful, but be sure to add things only you know, such
as: that the people at XYZ Corporation will pay but are always late with checks, that the
bank statement usually comes on the Xth day of the month, how your group’s software
works, and so on.
Two months before, meet with the new treasurer to review your records in detail.
These include your filing system, forms, names of contacts from banks and vendors,
contracts with hotels, computer software, policies and procedures, bank statement,
budgets, and others. Also, outline where the Chapter is in the budgeting process. Be
available to answer questions should the need arise. Your role is to offer support and
guidance.
One month before, get signature cards from the bank and other financial institutions for
checking and savings accounts.
Have the new treasurer and other appropriate board members sign them.
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Conflict of Interest Policy
Because of the fiduciary duties inherent in the board of directors of a Chapter, a Chapter
should develop a conflict of interest policy in an attempt to identify and protect itself against
any potential ethical dilemmas. Such a policy may also protect the Chapter from any
potential perception of Chapter assets benefiting private individuals, a strict prohibition of
501(c)(6) tax-exempt status.
The following examples may be considered a conflict of interest between a board of
directors and a Chapter.
Example 1: Director Smith serves on a Chapter’s board of directors. Smith also owns 25
percent of Sunny Publishing Company. The Chapter enters into a contract with Sunny
Publishing Company to print the Chapter’s membership directory. Smith knows that this will
be good business for the publishing company, but he also knows that, if the Chapter were
to inquire, it would obtain a better price for the publication of its membership directory at
Rainy Publishing Company.
Example 2: Director Smith has served as a director for an APICS Chapter for ten years and
is well known to all board members. Smith desperately needs a loan, and the chair of the
board—without checking with other members of the board—agrees that it will be no
problem to make a $2,000 loan to Smith out of the Chapter’s funds.
Example 3: Director Smith serves on the board of an APICS Chapter. Smith also owns a
private consulting practice and specializes in providing instruction to corporations for CPIM
certification courses. The Chapter also provides CPIM certification courses. Without
surveying the market for competitive bids, the Chapter gives Smith an exclusive contract to
instruct all of the Chapter’s certification courses.
If any of these situations sound familiar, contact APICS Channel Partner Services.
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Financial Status of APICS Chapters
Not-for-profit organizations like APICS exist for different reasons than commercial
organizations. In oversimplified terms, a commercial organization exists to realize a profit,
while a not-for-profit organization exists to meet some need of the community or of its
members.
As long as a not-for-profit organization has sufficient resources to carry out its objectives,
there is no real need for it to make a profit or have an excess of income over expense.
While a prudent board may want to have a “profit” to provide for a rainy day, a surplus or
profit is only incidental to the principal objective of the board, which is to fulfill the functions
for which the organization was founded.
Nonprofit, Tax-Exempt, or Not-for-Profit?
Although the terms nonprofit, tax-exempt, and not-for-profit are used interchangeably by the
general public, they actually mean different things.
Nonprofit means an entity has been organized under and according to the provisions of
state, country, and province nonprofit statutes. Despite the name, a nonprofit organization
may make a profit, as long as that profit is devoted to the organization’s nonprofit purpose
and is not distributed to the organization’s members or managers.
Not-for-profit is a term coined by individuals associated with the industry to describe
organizations that are primarily operated not for a profit, but to serve the needs of the
community or the organizations’ members. Although the term not-for-profit is used by
industry professionals because it best characterizes the intent of such organizations’
operations, it has no legislative or regulatory significance.
A tax-exempt entity is one classified by the Internal Revenue Service as exempt from
federal income taxes under certain provisions of the Internal Revenue Code. Just because
an organization has nonprofit status under applicable state law does not mean it
automatically has federal tax-exempt status. Also, an organization that is considered tax-
exempt by the IRS may still have to pay state and local taxes.
A Chapter may correctly be identified as a nonprofit, tax-exempt, not-for-profit organization when
it is incorporated in its resident state/country/province under that jurisdictions nonprofit statute;

and has applied for and received recognition from the IRS as exempt from federal income taxes
(US only).

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Definition of a Professional Society
The Internal Revenue Code provides an exemption from federal income taxes for
professional societies, or business leagues, under Section 501(c)(6). The regulations define
such an organization as follows:
1. Its members must have a common business interest.
2. Its purpose must be to promote that interest.
3. Its purpose must not be to engage in a regular business of a kind ordinarily carried
on for profit.
4. Its activities should be directed to the improvement of business conditions of one or
more lines of business as distinguished from the performance of particular services
for individual persons.
5. It is not organized primarily for profit.
6. No part of its net earnings may insure to the benefit of any private individual.
APICS and its individual Chapters fit the definition of a professional society and, as such,
may be granted tax-exempt status under Internal Revenue Code Section 501(c)(6).
What Is the Difference Between 501(c)(6) and 501(c)(3)?
Not-for-profit trade associations, professional societies, and business leagues whose
earnings do not benefit private individuals may be determined by the IRS to be exempt from
federal income taxation under Internal Revenue Code Section 501(c)(6). Such
organizations are not prohibited from engaging in political campaign activity, and there is no
specific limit on lobbying expenditures.
In general, religious, educational, scientific, or charitable organizations whose earnings do
not benefit private individuals may be determined by the IRS to be exempt from federal
income taxation under Internal Revenue Code Section 501(c)(3). The primary advantage of
501(c)(3) exemption is that charitable contributions by individual and corporate donors to
the organization may qualify as income tax deductions for those donors. Organizations
designated as 501(c)(3) are also eligible for significantly reduced postal rates, subject to
specific restrictions. The drawbacks to 501(c)(3) status are the strict prohibition against
engaging in political campaign activities and the limitation on expenditures for lobbying
activities.
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